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Name
Forward Transaction of Foreign Exchange
Introduction
Forward Transaction of Foreign Exchange refers to the foreign exchange transaction on a foreign exchange rate agreed by the buyer and seller under a foreign exchange contract, and for delivery on an agreed day, which is generally a certain day after the second working day after the transaction.
Features
1. A customer entrusts one bank with the purchasing of a certain currency and the selling of another currency at a contractual foreign exchange rate on a specified settlement day to achieve the conversion between various foreign currencies.
2. The forward price of a currency with a high interest rate is cheaper; so, the risk of the exchange rate is completely locked, and the foreign exchange rate of delivery day in the future is determined on the transaction day.
Target Customers
1. It can meet the customer's demand for transactions among foreign currencies some day in the future, to company's settlement of import and export trade, to the payment of L/C margin and so on.
2. Customers are required to open foreign currency accounts at Bank of China.
Application Qualifications
1. A specified trading period less than one year and more than two banking days is determined according to customers' demands.
2. Applicant is required to deposit certain amount of margin.
Procedure
1. Signature of an agreement: Before a forward foreign exchange transaction is carried out with Bank of China, the applicant is required to reach, also with Bank of China, a general agreement on value-maintenance foreign exchange transactions and application letter for foreign exchange transactions.
2. Implementation of margin: applicant shall deposit cash in proportion or apply credit line as margin.
3. Inquiry: The applicant determines the details of a forward foreign exchange transaction via the consignment in written form and makes the corresponding inquiry to Bank of China.
4. Transaction conclusion: after concluding the transaction, Bank of China will deliver the transaction confirmation to the applicant in written form.
5. Settlement: the actual settlement shall take place on the settlement date. The applicants may require the bank to unwind the transaction or give the extension period to the transaction before the transaction day according to its needs.
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